Experts warn long-government negotiations could impact Czech economy

With long and complicated post-election talks a possibility after the result of the Czech legislative elections, economists are warning that this may cause problems for the country’s economic stability and its industrial growth, Czech Radio’s news service writes.

Jan Švejnar | Photo: Prokop Havel,  Český rozhlas

Jan Švejnar, the head of the think-tank Institute for Democracy and Economic Analysis (IDEA) warned of this prospect on Czech Television’s weekly Sunday politics debate programme Otázky Václava Moravce.

He also said that the Czech Republic would now benefit from an emphasis on its industrial production, rather than on offering benefits to senior citizens. This, he said, is important in order to restart the economy and help with the country’s rising debt.

Tomáš Sedláček | Photo: Kristýna Maková,  Radio Prague International

Economist Tomáš Sedláček, who sits in the National Economic Council of the Government (NERV), agreed that now is the time to restart the economy and added that the Czech Republic must return to implementing reforms.

Meanwhile, sociologist Daniel Prokop said he believes that a large part of the country’s deficit is not connected to the effects of the coronavirus pandemic, but with badly thought out adjustments to the country’s tax policy and an overemphasis on increasing pensions. He also said that the ongoing steep rise in energy prices is particularly affecting poor households, which are also being impacted by high social security contributions.

According to Prokop, the poorest five percent would benefit little from a tax reform. Instead, he said, a more right-leaning solution would be to let this group keep more money from their incomes.

Daniel Prokop | Photo: Khalil Baalbaki,  Český rozhlas

IDEA director and economist Jan Švejnar agreed that a centre-right government should focus more specifically on the poorest members of society. Daniel Prokop, on the other hand, said emphasis should, for example, be placed on supporting building savings, which are currently affected by high bank fees.

While the current opposition coalitions SPOLU and Pirates and Mayors received enough votes in last weekend’s elections to propose forming a majority government, it is still unclear whom President Miloš Zeman will name as Prime Minister. Traditionally, the person who is named as Prime Minister by the head of state gets two attempts at forming a government.

Miloš Zeman | Photo: Eva Šelepová,  Český rozhlas

The president said ahead of the elections that he will name the leader of the strongest party represented in the Chamber of Deputies. However, that party is Andrej Babiš’s ANO, which, based on the SPOLU and Pirates and Mayors coalition agreement not to enter into talks with Mr Babiš, is unlikely to get support. The issue is further complicated by the current state of President Zeman’s health. He is currently hospitalised in the Military University Hospital in Prague.